You may recall in a post last month (Don't Tick Off the Comptroller) that I was sorting through the finer points of getting squared away with the sales & use tax imposed on Texas businesses and, more specifically, me. Well the good news is that I now have that permit and that with my continued cooperation, Uncle Tex and I are on good terms, payments pending of course.
Today I got a letter from the Texas Workforce Commission.
It did introduce itself as an automated letter that was sent out because of my registration with the Comptroller but it included language that was ambiguous as to whether I was actually subject to the tax it oversees. The TWC (Not to be confused with Time Warner Cable) is the entity that manages unemployment insurance among other things. The Texas Unemployment Compensation Act (TUCA) is what requires employers to pay a tax that would help cover unemployment benefits for out of work employees. Being a sole proprietor and not having any employees besides myself, I would think it would be nuts to have me pay unemployment insurance tax as it seems pretty unlikely I would fire myself. With that said, I remembered one of my friends who does fiberglass work had mentioned he had to pay it so the issue seemed a little uncertain.
I went the the website listed on the letter and then did some research within and in the broader web. On the TWC website I found a FAQ page on employer responsibility which raised concern. To the question "who must pay unemployment tax?" the page said (with my emphases underlined):
The Texas Unemployment Compensation Act (TUCA) requires Texas employers - including sole proprietorships, partnerships and corporations - to pay UI tax. Employers must pay UI taxes if they:
- Pay at least $1,500 in wages in any one calendar quarter during the current or preceding calendar year, or
- Employ at least one worker for a day or more each week for 20 weeks during a year, or
- Acquires or otherwise receives, through any means, all or part of the organization, trade, business, or workforce of a subject employer, or
- Are a 501(c)(3) nonprofit organization (excluding churches and religious organizations) and have at least four employees for part of a day or more each week for 20 weeks, or
- Elect to become a subject employer, or
- Have Texas employees and are subject to the Federal Unemployment Tax Act (FUTA), or
- Are a state political subdivision that one or more political subdivisions own, or
- Pay $1,000 or more wages one calendar quarter for domestic service, or
- Pay $6,250 or more wages one calendar quarter for farm or ranch labor, or
- Employ a seasonal worker on a truck farm, orchard or vineyard, or
- Employ a migrant and a seasonal worker doing the same work at the same time and location (Otherwise, the law may not cover seasonal workers)
As you can see, it's a little ambiguous still but they seemed to be making sure sole proprietors like myself are included. I called the local TWC office.
After an initial operator put me on hold for a couple minutes, possibly in homage to what the cable company with the same initials does as well, I was on the phone with a very pleasant lady named Kim who thankfully was able to clarify what my liabilities actually were.
For starters, and this is the biggie, because I'm a DBA sole proprietorship who does not employ anyone other than myself, I am not liable to pay unemployment tax. *insert blog title here*
Furthermore, even if it was just me and even my wife and/or kid(s) up to the age of 21 on the payroll, I would not be liable. This is good news. I'm not really close to getting any employees at this point but it's nice to know just in case. I was able to ask about other details like what constitutes a contract employee as well which is good because often I have done work for other companies that was part of their service that was sold to their customer. It was confirmed that in such transactions using the 1099 form is a good way to go. Kim also suggested that in general, making sure you invoice people you do work with is a good idea to maintain a paper trail and be able to account for income and expense as needed showing business transactions as opposed to an employment relationship.
So there you have it. That was my little adventure today. Admittedly this is not specifically photography related but I figure it is nonetheless useful to those out there that are running small businesses and wondering about liabilities. Heck, I like to share.
Speaking of sharing, a midst all the craziness of this past 30-something days, I wound up picking up Owl City's new release "All Things Bright And Beautiful" and have been enjoying the light and airy sounds as part of my stress reduction strategy. Check it out!